1981 (12) TMI 17 - HC - Income Tax

Summary

Issues involved:
The issues involved in this judgment are:
1. Validity of notice issued u/s 263(1) of the Income Tax Act, 1961.
2. Adequacy of opportunity of being heard to the assessee.
3. Validity of the order passed by the Commissioner of Income-tax u/s 263.
4. Justifiability of refusing to direct the Commissioner to pass a fresh order u/s 263 after giving the assessee further opportunity of being heard.

Validity of notice issued u/s 263(1):
The Supreme Court precedent in CIT v. Electro House [1971] 82 ITR 824 establishes that no specific notice is required under s. 263(1) of the Act, only an opportunity of being heard must be provided. Therefore, the absence of a notice does not affect the Commissioner's jurisdiction to exercise power u/s 263(1).

Adequacy of opportunity of being heard:
Section 263(1) mandates that the Commissioner must give the assessee a reasonable opportunity of being heard before reaching a decision. In this case, the Tribunal found that the notice of hearing was served on the authorized representative of the assessee and a family member of one of the partners just one day before the scheduled hearing, which did not constitute a proper opportunity for the assessee to present their case. Hence, the Tribunal's decision was in favor of the assessee on this issue.

Validity of the order passed by the Commissioner u/s 263:
The Tribunal's majority opinion that the order of the Commissioner was void ab initio due to a lack of proper opportunity for the assessee was not upheld. The Supreme Court precedent clarifies that a breach of natural justice principles may affect the legality of the order but not the Commissioner's jurisdiction. Therefore, the order passed by the Commissioner was held to be valid.

Refusal to direct a fresh order u/s 263:
The Tribunal's decision to refuse directing the Commissioner to pass a fresh order u/s 263 after finding the original order void ab initio was deemed incorrect. The Tribunal had the jurisdiction to remand the case to the Commissioner for a fresh decision if there was a lack of adequate opportunity for the assessee. As the finding of the Tribunal regarding the order's validity was not justified, it was deemed improper to refuse a fresh order. Hence, the Tribunal's decision was against the assessee on this issue.

In conclusion, the High Court answered the reference questions accordingly, with each issue analyzed and determined based on legal principles and precedents.